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Model Thinking 


Scott E Page 



Public Project 



Person 1: $40 


Person 2: $50 


Person 3: $20 


Cost: $80 



Hidden Information 



Pivot Mechanism 



Idea: Pay the minimal 
amount you’d have to 
contribute for the 
project to be viable. 



A 



Clarke-Groves-Vickery 
Pivot Mechanism: 

Each person claims value 

VI, V2, V3 

I f V1+V?+V3 > Co st 
Do the project 





Person \1: $40 



Person 2:|$50^ 


Person 3 





Cost: $80 , 

CO'10- ^ lt» 


Cost = $80, Value = $40 



Net 



0 40 









Cost = $80, Value = $40 


Sum of Claimed 


Others 

Value 

Pav 

Net 

30 

30 

O 


(fS> 

45 


V 

0 

90 x 

. 30 

0 

40 








Cost - $80{ Value = $40 



45 50 35 5 

90 50 0 40 








Incentive Compatible: 

Each person has an 

incentive to reveal her 
true value. 



Person 1: $30 


Person 2: $30^Q, 
Person 3: $30 


Cost: $90 0 \ 0 

:A 


Person 1: $40 


Person 2: $50 
Person 3: $20 


X 


Cost: $80 

n<D 

'R 1 ? O 


Efficient r 

Always Join ^ / 

Incentive Compatible 




Impossible! 





Hidden Action 



Hidden Information 



Model Thinking 


Scott E Page